The wrote about us

5 September 2006, Interview with the Management Board of Azymut for Biblioteka Analiz [The Company Profile]

We may sleep more calmly

Interview with Ms. Teresa Włochyńska - a president and Mr.Mr. Andrzej Nadolski and Jerzy Majewski - Members of the Management Board of All-Poland Distribution System Azymut

The situation of Azymut has much changed over the recent two - three years. Starting as an uncertain partner for publishers, you have become one of the leading players. You pay on time, you have active capital, you develop sales for publishers…

Teresa Włochyńska: From among the present composition of the Board, Andrzej was the first to start these changes in October 2002. We have been working together since May 2003.

Andrzej Nadolski: We three, with Ryszard Knauff and Wojtek Krasuski, have joined the Management Board as the members of the Management Board of PWN Scientific Publishers. Mr. Andrzej Uryga has also been a member of the Board for some time. Changes were introduced in a nervous atmosphere and the whole operation got a lot of publicity among publishers. However, it does not change the fact that everything was very precisely planned and carried out. First of all, we started with centralisation process by liquidating branches, director posts, excessive logistics. We have left premises at Kolejowa Street, where we had been paying an enormous rent, we have also reduced a number of cooperating publishers. And it should be mentioned that this process had been initiated by the previous Management Board, with Mr. Grzegorz Majerowicz as the president, although the progress was too slow. Changes that we have made were difficult. Generally speaking it was all about serious cutbacks in costs. Then Teresa joined us as the President, two weeks later Jerzy joined the Management Board and we started to work on the second side of this business, that is on reconstruction of sales which was inevitably affected by the restructuring process.

And you, Sir, were a representative of Azymut's owner in this whole activity. Did it happen that PWN, being aware of funds allocated in Azymut development, wondered what they should do with this company?

AN: Obviously. Each year was expected to bring the improvement but it didn't. Therefore various scenarios were analysed. Finally we made a decision on further operation of Azymut and on its support by PWN Group – either by raising the capital or by distributing the whole production of the Group by our own wholesaler. Even including Medical Publishers - Wydawnictwo Lekarskie PZWL, which have been always selling their products through their own warehouse. Basing on this scenario as the primary business model, we have reduced a number of cooperating publishers.

And has an idea of liquidating the wholesale company emerged?

AN: Yes, it was one of analysed scenarios

Looking at this situation from the current perspective: need such costs be born to develop Azymut? No other wholesale company may compare themselves to you from the point of view of invested funds.

AN: Perhaps Wkra…

Not even Wkra.

AN: From the perspective of those years I think that the main sin was a wrong assessment of the market, its characteristics and consolidation rate. And on the other hand, the wrong conviction that a company based on a central warehouse, in contemporary situation of wholesale market, would not be successful, that branches and pattern rooms were needed and that book dealers should have ready access to the offer.

And as for Azymut's loss, has it not been in fact budgeted?

AN: One should distinguish here between a budgeted loss and actual loss which in subsequent years was higher than assumed. It has always proved that reality was more difficult.

Perhaps Azymut started too early. And it was not the model itself which proved wrong.

TW: However, even in those days there existed successful wholesalers who did not need any extended structures.

For example Olesiejuk Book Trade Company...

AN: For example

On the other hand there was a moment when Azymut generated gross receipts of PLN 130 million

AN: Only the owner would probably prefer half this amount but with no loss.

Excessive ambitions were also your undoing...

AN: I don't think so. Rather wrong assessment of opportunities to increase sales volume. And wrong assessment of the market as such.

TW: It was forecasted that in 2002 the company would reach 25% share in the market. It was a very optimistic forecast...

Jerzy Majewski: The main objective of adopted strategy was to reach the highest possible share in the market

And at as high price as possible...

AN: We should admit that cost structure was staggering. And it was not easy to match receipts to this structure. When coming here in 2002 we chose as the main goal the adjustment of costs to receipts' level that we considered achievable. It was an easier decision for us because we were put under the wall, not being able to step back. It was difficult to say – let's wait a year more, perhaps something would happen. There was no time for waiting.

As it proved, PLN 110 million gross receipts - that you have now - need not generate loss.

TW: Only today Azymut is a completely different company.

A plan of merger with Wkra was also considered.

AN: Yes, as one of possible scenarios.

I do not think that it was one of scenarios - apparently negotiations were quite advanced. However, today it is more important why there was no merger.

AN: Today it is even difficult to say... It was so long ago.

Perhaps someone has reached a conclusion that merger of loss with loss is not the best possible idea...

JM: The survey that we have carried out has shown that 80% of an offer of both entities did not overlap.

AN: After the first year of potential merger, when costs of restructuring of a new entity would have to be born, a positive financial result would be possible in the subsequent years. I do not know why we did not succeed to finalise the negotiations, and I think that every participant of these negotiations would give a different reason of failure.

Perhaps everyone wanted to become a president of a large distribution company.

AN: Definitely it was not about someone's personal ambitions.

What has changed after the change of a president?

AN: Our first joint decision was to resign of cooperation with markets. Although it meant the loss of PLN 10 million in turnover, but our financial result has improved. It has also proved that we may operate at Suwak Street with the same effectiveness as at Kolejowa Street, resigning of servicing Warsaw customers through sales from the pattern room. The first period of Teresa's work in the Management Board was mainly connected with reconstruction of Publishers' confidence

TW: We have also reduced a number of trade representatives - from 35 to 24. At present we have 22 such representatives.

AN: In return we have strengthened telemarketing.

So, how a large and modern distribution company should be structured to generate profit?

TW: It depends on the model. Olesiejuk brothers have adopted a different model: in my opinion they decided to be a specialised entity in a defined sales channel, an exclusive distributor and also the publisher... We started with a wholesale model, to offer - after 2002-2003 restructuring - also a wide range of distribution services. Already in this circle we wondered which way was the best for us, where the margin is higher, where is the future of such company as ours. Today we know that we want to be a wholesaler with precisely defined customers - book dealers and libraries, at the same time providing distribution services for publishers.

JM: In the case of a wholesale model it is extremely important to constantly survey the cost, because the margin is very low. It inter alia means that we are not able to finance wide promotion campaigns. For this reason costs of such campaigns are born by publishers. Fortunately, thanks to Internet such activities as well as contacts with the customers are not so expensive. Another question is selection of titles, correct management of distribution chain. Wide assortment in optimum quantities. Sometimes it does not pay to have the „proverbial” Harry Potter on sale, if it is connected with the risk of non-saleable products on stock.

TW: And proper relations with recipients and publishers.

AN: In the case of a wholesale company at the supraregional level, the success perhaps most largely depends on these relations. Proper relations with customers are based on matching products to their expectations and on offering quality services. Among others, something that Jurek was speaking about, that is taking advantage of new technologies - an opportunity of e-mail order sale and introducing Azymut invoices to recipient's software. And – in fact – the rigorous cost control. It seems that 1-3% profitability is a standard in the wholesale branch. In the case of Olesiejuk Brothers we think that financial result of their company is in fact effectively improved by publishing margin. Coming back to what Jurek was speaking about, it is enough to revaluate the purchase of a given title by 10% to ensure that its margin remains in unsold copies. In spite of appearances, it is a very complex business mechanism.

Have you recently noted any such slip-ups as for example that with unsold copies of „Harry Potter”?

AN: Such slip-ups no. But it happens that we lose several thousand zlotys. However, we count them in the risk.

JM: Although we have noted no spectacular slip-ups, the level of inventory reserve is constantly growing.

AN: An annual increment in this respect is not higher than PLN 100 thousand

In my opinion it is not high in such company as Azymut.

TW. However, it deteriorates our result... One must remember that apart from inventory reserve we also have other capital reserves, for example receivables reserve. Therefore in 2006 we insured our receivables, which was received with suspicion by some of our customers.

What is the idea of such insurance?

AN: We have signed a contract with Coface insurance company which is specialising in such services. Our receivables from customers are insured, which means that if we follow relevant procedures, and a customer has not paid their liabilities towards us for example because of bankruptcy, after an agreed time - as I remember well it is 90 days - after liabilities became due, the insurance company pays us their value.

TW: Earlier the insurance company verifies credit limits awarded to our customers and their financial condition - to see if the limit was correctly awarded.

Did it happen that such service scared any of your customers?

AN: Fortunately no.

But book dealers started to buy more rationally.

AN: Yes, it is true. Although perhaps our sales volume in relations with them will slightly drop, we sleep calmly. We shall not certainly repeat slip-up with Wrocław Reprint, where we have "left" several hundred thousand zlotys.

And do you take advantage of operating credit?

AN: We do yet. In culminating point it reaches PLN 12 million, but later it drops to zero. But we have resigned of factoring which was intended to improve our cash flow. We have replaced it with much more profitable credit line - debit line negotiated from the level of PWN Group.

And what was your experience with school books?

TW: The season has not yet ended, thus it is too early for any conclusions.

But you were selling school books already last year.

JM: Only in small quantities.

AN: And this year we are noting large increase in this regard.

TW: As concerns an educational offer, these are first of all books of PWN School Publishers, which we have been also earlier selling. And this is a considerable part of our school books' sales volume.

Do you already sell books taken over by this company from Demart?

TW: We have been selling them also earlier, before this transaction. Nothing has changed here. Last year school books accounted for ca 20% of Azymut turnover – half of them came from an offer of PWN School Publishers and a half from an offer of other publishers. This year the proportion will significantly change, because we plan to double sales from an offer of other publishers than WSZ PWN. We forecast that it should be an amount of ca PLN 30 million, maybe even more.

Which educational publishers do you have in your offer?

AN: All of them. All big ones.

If Wkra was closed this year, there is a chance that not only Wikr, but also you would take over a part of its sales volume.

AN: But there is a risk - resulting from political decisions - that no one will take over this turnover. It is difficult to build the future basing on this segment.

Why don't you get well with Empik?

TW: Empik is our recipient, although a marginal one… At least today.

Was it very painful for you when PolPerfect took over distribution of PWN Scientific Publishers' books to Empik?

TW: Certainly …

As a matter of prestige you must have lost in result.

TW: You mean here prestige connected with distribution to Empik or prestige connected with distribution of PWN Scientific Publishers' books?

Rather the latter. If PWN were satisfied of your services, they would not take such decision…

AN: In my opinion it is not so simple as you think. As you well know it was not a question of satisfaction or its lack, but a question of other side's proposal.

JM: And it is not an isolated case as regards Empik and PolPerfekt…

AN: And besides, PWN Scientific Publishers are satisfied of their offer being sold by Azymut.

From the outside it looks as if Azymut and Empik offended each other.

AN: There is no place for taking offences in business. When Eyal Lahav has become the president of Empik we hoped to create a basis for the long cooperation, satisfactory for both sides. However later, for various reasons the situation has completely changed.

TW: We are not able to compete with terms of trade agreed by Empik with PolPerfekt and other suppliers, also with publishers, who - which is natural - may offer higher rebate than Azymut.

AN: Depending on how Empik cares about a given customer, they propose him cooperation with PolPerfekt or other distributor. Terms of trade much differ here…

JM: Empik also demands full right to return and manage the stock, to protect books and a traditional wholesale company simply cannot afford this.

TW: There is also no sales volume guarantee in a given period and no clearly defined group of publishers that the distribution services are provided to. I expected to have it all this year, after Paweł Pakuła had taken up a position of a book section director. However, I was once again informed about the change of strategy towards distributors.

JM: To be clear – we do not refuse anything to Empik. We have signed contracts with publishers and try to sell their books, but Empik not always allows us to do so.

And do you cooperate with Matras?

TW: Matras is our recipient as far as publications of PWN Scientific Publishers are concerned. Our biggest recipients are other book trade networks, we generate high sales volume while cooperating with Domy Książki… Our position is very strong here – a considerable part of sales come from non-education literature in a wide sense of this term.

And what is the share of PWN Group in Azymut's turnover?

AN: This year less than 40%.

Two years ago it was more than 60%.

AN: We are constantly developing our activity in other areas.

What is the share of Internet order sales?

JM: Presently about 40% of turnover. We note a dynamic growth in this area.

And how would you estimate the level of your satisfaction of hosting services for book dealers initiated last year?

JM: We are very satisfied – I mean here the sales volume generated in this way. Last year it gave us PLN 1.5 million. AN: It is a way to provide for ultimate customers, which we normally wanted to avoid to prevent competing with our recipients. So far 50 book shops took advantage of our hosting services. It is not a bad result for one year of activity.

TW: Result of individual book shops largely depends on involvement of their owners and staff in promoting own Internet shops. Some book dealers are more satisfied of their sales volume, and some less. We look forward to this service as a means of acquiring an additional source of turnover.

AN: Similarly as book dealers, for whom the direct and at the same time remote contact with the customer will be growing on importance.

JM: For them it is also a form of publicity, becoming known in Internet.

TW: We are constantly improving this instrument, matching our services to customers' expectations.

You invest quite a lot in IT.

TW: We are looking forward to a new project that we are developing under the name of "Homer". It is still in an initial phase, so we may only disclose that it is a programme of services for book shops.

JM: However, so far changes in logistics and software for a new warehouse are the most important task for us.

AN: Because - as you know - we are moving to a new warehouse in Stryków near Łódź in 2007.

Do you own this estate?

AN: No. We shall be renting the warehouse.

Is it cheaper?

AN: The choice depends on business priorities. It is a solution that we have chosen.

Will you liquidate the warehouse at Suwak Street after moving to Stryków?

JM: We must have a small warehouse in Warsaw, because many of our suppliers have their head offices here. Of course it needn't be Suwak. And a new large warehouse that we are building in Stryków is essential for us. Already in 2006 we plan to handle a turnover of PLN 250 million, composed of wholesale and distribution services for publishers. It gives us 25 thousand completion lines a day in a season, which is very difficult to handle from the present location.

AN: We try to develop both kinds of activity: wholesale and distribution. As regards distribution, this year we won Publicat Group, Urban & Partner publishers, and earlier – Sic!, Langenscheidt, and partly Rebis. Certainly the whole PWN Group too. A growing number of small and medium-sized entities are interested in such services. As a matter of fact we encourage them. Publishers should first of all focus on publishing and marketing.

TW: As we observe, publishers' awareness and business knowledge incline them to contract out distribution of their publications to such companies as Azymut. Being a wholesaler certainly gives you a valuable know-how for being a distributor. Contrary to stricte distribution companies we well know recipients and specific character of services provided to them and we are able to adjust ourselves to publishers' expectations. However, to be able to develop such activities we must have a large and modern warehouse.

And what revenue do you plan for this year?

AN: About PLN 120 million, with PLN 2.2 million profit.

What is the progress in plan implementation?

AN: We are exceeding it.

And what is the situation of Sygnatura company founded by Azymut, which was planned to distribute to book shops digitally printed copies of sold out books?

AN: Sygnatura did not start well.

Sygnatura was or is?

AN: We could say that it was. We want to transfer their activities to Azymut.

TW: Perhaps it was too early to launch such a project..

How, in your opinion, the book market may change after the ministerial programme of „Cheap school book” is launched?

AN: Exclusion of book shops from selling school books will unquestionably be a shock for the market. Almost a half of sales of many book shops come from school books, the situation of many wholesalers is similar.

TW: I hope that this plan will not come true. As an active member of newly established Polish Book Trade Chamber we have prepared a paper showing that the most efficient school books' distribution on our market is through book shops and wholesalers.

Interviewers: Łukasz Gołębiewski and Kuba Frołow

4 July 2006, Biblioteka Analiz: Distribution Azymut

Electronics and a new warehouse

Nowadays Azymut is not only an important trade partner for publishers, with whom - as they say - they achieve the growing sales volume on the bookselling market, but also a logistics service provider, who they more and more willingly entrust with the task of complex warehouse management. The wholesale company does not limit itself to basic distribution activities. Beside book storage, handling deliveries, management and handling of contractors' returns, they offer the whole range of sales support activities.

- We provide services to so wide range of publishers that we probably fully cover the scope of services that they need today for trading. All the more that we have developed new kinds of services for customers who entrusted us with logistics services provision this year, such as Publicat Group and Urban & Partner. These publishers may not only take advantage of our experience and skills in handling orders, quick and correct completion and customer delivery on the next day, but also flexibility in satisfying their needs - as Mr. Jerzy Majewski, a member of the Management Board responsible for distribution says.

Azymut offers to publishers different tools for placing orders. Such as for example installation in their offices of special terminals integrated to Azymut IT system, which allows the sales section of the publishers to select on-line the product, the customer or to place a specific order or disposition. Azymut also offers integration of customer computer system into its own.

So far the company has been cooperating with such systems as EXACT, Dynamics , SIBEL, Ferrodo, Televox, Kadet, Twój Kurier (Stolica, Opek, DHL). - These are examples of current deployments. Azymut, which presently has a strong IT section (15 persons of the staff), may link with any system of the publisher - Mr. Majewski assures.

Beside the electronic forms of publisher's dispositions reception, the company offers orders accepting services on behalf of publishers. Azymut Call Center provides active sales services on their behalf and also receives orders via telephone, fax or e-mail. It is advantageous for publishers who have resigned of own sales administration. Such services are also supported by AMOS system.

Trade representatives of publishers are equipped by Azymut with palmtops and software enabling direct access to wholesaler's base, which allows for placing orders from book shops or other sales points (hypermarket, school). Presently Rebis, PZWL and Publicat take advantage of this form of cooperation.

The wholesale company owned by PWN also provides the IT and delivery services connected with e-commerce to editors. All orders placed by individual customers in Internet book shops are sent directly to Azymut system and are processed by this system on behalf of the publishers.

Parcels may be wrapped in accordance with the publisher's standards (at present such services are provided to the following publishers: WN PWN, PZWL, Książnica). The range of offered services also includes handling subscriptions (Urban & Partner) and enforcement of dues.

-Within the framework of logistic services we also keep the so called IT warehouse, which enables on-line reporting according to the needs of our customers and data transfer to the publisher's system - as Jerzy Majewski explains. The following customers presently take advantage of distribution services provided by OSDW Azymut: PWN Group (PWN Scientific Publishers, PWN School Publishers, Medical Publishers - PZWL), Publicat Group (Publicat, Książnica, Wydawnictwo Dolnośląskie), Langenscheidt Polska, Rebis, Sic!, Urban &Partner and several smaller customers, who incidentally contract out various services.

Azymut sales volume forecasted for 2006 amounts to more than PLN 230 million. It includes about PLN 120 million of wholesale on their own behalf and about PLN 110 million of turnover connected with the above described distribution services commissioned by publishers and provided on their behalf. This sales volume is only a starting point for further dynamic development in the forthcoming years - as we hear in the company.

The company is changing the system of work, and - in result - warehouse location and potential. At present Azymut has at its disposal 9500 square meters of warehouse area at three locations in Łódź. The biggest warehouse (6500 square meters) is owned by Azymut, while two smaller ones (2500 and 1000 square meters) are rented. The new warehouse will be located in Stryków, at crossroads of A1 and A2 motorways, 7 km from Łódź. Planned area - 8500 square meters, with an opportunity of quick expansion to 12.5 thousand square meters. Introduction of a new high storage system will allow for doubling the amount of stored goods. Today 35 thousand titles are stored at Azymut warehouse shelves and it is planned to increase this amount to 60 thousand titles.

According to Jerzy Majewski - "the new completion system will allow to increase the present number of handled order lines from 20 to 40 thousand, which means an opportunity of completing 3000-4000 parcels during one shift". New technological solutions will allow - in his opinion - to triple labour productivity. It is planned that the new warehouse will start functioning on 1 March 2007. The second stage of investment is planned for 2009-2010 when inter alia the Stryków warehouse will be enlarged by subsequent 4000 square meters. Overall sales volume at a level of PLN 600 million is planned, including both wholesale and distribution.

20 June 2006, Biblioteka Analiz: Electronic Azymut

Screening the leader

The All-Poland Distribution System Azymut has won in the third edition of top distributors ranking. We shall try to present in the forthcoming issues of Biblioteka Analiz [The Company Profile] the most important advantages of the wholesale company owned by PWN, largely basing on materials from presentation that our leader has prepared for its customers for the conclusion of the 51st International Book Fair. Today we shall try to describe Azymut IT solutions, which enable the publishers to reach a very wide circle of recipients with information on a book.

The role of IT in our trade increases very dynamically – Ms. Teresa Włochyńska – Azymut president says. Even three years ago the share of e-commerce (B2B) in Azymut sales was only 5%. In 2005 e-mail orders accounted already for 23% of total sales and in the first quarter of 2006 they exceeded 30%. „The Virtual Warehouse is a modern and user-friendly tool which enables easy and quick access to offered titles and allows for placing orders via Internet - any time and from everywhere", we read at the wholesaler's website. The growing number of Virtual Warehouse customers is perhaps the best confirmation of these words - growth from 484 in the first quarter to 931 in the last quarter of 2005. They include booksellers, Internet book shops and libraries.

However, a key element of Azymut e-commerce is the Virtual Database (VD). The Virtual Database that we shall describe here, supplies not only the Virtual Warehouse where orders for individual titles are placed. Descriptions generated in the base are also sent to more than 100 Internet book shops (such as Merlin) including hosting book shops - those traditional, which some time ago took advantage of wholesaler hosting services. The wholesaler, basing on its graphical and functional layout, proposed to create their websites, of course with a bookselling option. 40 entities took advantage of such service. Today Azymut VD is their Internet base of titles. Present resources of Azymut VD include more than 150 thousand bibliographic descriptions with cover scans, including 30,475 titles available in Azymut, 15,757 titles in sales - non-available in the distributor's resources and more than 106 thousand out-of-stock titles.

Recently the Virtual Database has been considerably expanded by descriptions taken from databases of the Book Information Centre, a company which was taken over by Azymut last year from PWN, the Polish Book Chamber and the Polish Publishers' Association.

VD is fed by Azymut staff who catalogue books (describe them and scan their covers) - in this case records are based on available book copy. Data are also downloaded from files supplied by publishers (previews' editor). Last year 16 thousand titles were registered in the Virtual Database - half of them were the latest releases. Publishers (74) registered only 2000 publications. Azymut encourages publishers to edit descriptions by themselves. – It happens that an annotation on a book cover is laconic or non-existent. In such case our employee has problems with proper and thorough description of the book. And the publisher will do it in the best way – as president Włochyńska explains. Thanks to our IT solutions and recipients' database all publishers are offered free e-commerce services consisting in sending information about previews and latest releases to book shops, Internet shops and libraries cooperating with us.

To enable the customers to receive an information about previews, first the publisher must fill in a special form at Azymut website, entering the bibliographic description and appending a graphic file with the cover of the publication. A "product card" created in this way is sent by e-mail to more than 2 thousand subscribers of Azymut e-commerce services (picture 1). The placed order may be sent to the Virtual Warehouse or directly to the publisher (a new type of service for publishers!) in a form of the so called orders' record containing a whole set of data necessary to dispatch the ordered product. It is worthwhile to mention that the recipient may place an order directly from the received e-mail, by inserting a number of copies of selected titles (of course the mechanism handles the latest releases and not previews - see picture 2) and putting an order in customer's shopping cart. Placing orders directly from e-mail - it is another facility of the Virtual Warehouse. Beside the classical Internet shop functions, the Virtual Warehouse also provides information on literary prizes, publishing previews and latest releases, bestsellers and promotions. The growing number of editors cooperating with our winner take advantage of this service.

In the second half of 2005 Azymut initiated further wide R&D works aimed at extending the Virtual Warehouse potential, to develop its search engine, raise the standard of the database structure and improve data quality. The company takes the view that it is worth to apply library standards at the bookselling-wholesaling market (format of bibliographic description).

Azymut editorial section (the Book Information Centre) has initiated categorisation works using a new tool for attributing themes, both as concerns new entries in the Virtual Database (starting from December 2005) and a part of earlier records (so far about one third of all records have been modified). This new classification solution is mainly characterised by hierarchic structure, by an opportunity of attributing many themes to one record, an opportunity of building inter-theme relations, as well as by a bigger number of search keys. It also classifies applied terms into these which mainly describe the publishing form of a book (such entries as: encyclopaedia, album, school book, etc.), and those which describe the contents and subject of a publication (for example physics, cardiology, history of Poland, etc.). It additionally allows for using proper names (personal names, geographic names, names of institutions, objects and events). The glossary includes authors' names and serial titles. This mechanism will allow for moving directly to other books of a given author or to subsequent volumes in a series, with no necessity of asking additional questions.

The new classification will be introduced to Azymut VD in the second half of the year – in result Azymut database will not only be the biggest on the wholesaling market, but also the most coherent.

Kuba Frołow